NO EASY RIDE FOR VW SUPPLIERS

Francisco Javier Garcia Sanz is director of purchasing at Volkswagen. Sanz, 41, started his career in 1979 as a purchasing clerk at Adam Opel AG. He quickly rose through the ranks, eventually becoming executive director of worldwide purchasing for General Motors in Detroit.

He joined Volkswagen as head of electric/electronic purchasing in 1993. Sanz was interviewed in Paris just before handing out Volkswagen's Leading Edge awards by Edmund Chew.

On what criteria did you select suppliers for Volkswagen's Leading Edge awards?

This year we are going to present awards to 59 suppliers from a worldwide base of 3,000 to 4,000. We have a large number of suppliers because our platform strategy is not yet fully implemented.

The criteria are very tough and are based around five issues: quality, service, innovation, worldwide competitiveness and the technical flexibility to deal with problems.

Volkswagen's Leading Edge vision means everything we do has to be of a world-class standard. We constantly have to benchmark ourselves.

We have to look at who is the best - and not just match them but pass them. In the future we are only going to work with a world-class supplier base that thinks and acts like we do. VW is not going to be an easy customer.

When VW talks of partnership, it does not mean a harmony club. Suppliers should expect criticism and accept that they will have to improve.

What would you most like to see improved in your supplier base?

The complete process, from development to delivery, needs to be improved. VW and its suppliers need to match the way they think and work.

Sometimes we go in different directions, which results in a lot of wasted time. The biggest challenge for the next century will be interlinking our production, development and purchasing processes.

Another area we are concentrating on is new technology in electronics and interiors. Here we can go to the big suppliers like Johnson Controls and Faurecia; they are doing a lot of work integrating modules and putting more functions into various modules.

How many suppliers do you expect to have when the platform program is implemented?

I cannot answer that question because the reduction of suppliers is not a target for us. Our aim is to be competitive worldwide. Of course, the platform strategy will reduce the number of suppliers - but that will come automatically, not because we have targeted it.

Will you use more systems and modules in the future?

We have a clear strategy at VW. We will not be awarding 100 percent systems capabilities to our suppliers; we want to maintain systems development as a core business. Of course, logistical requirements vary across different plants in different countries.

We want to have systems integrators that will supply modules to the different plants under our control.

So we will continue to modularize, but we will maintain development capabilities.

With the platform strategy, because of the high synergies that we have, the only supplier that can integrate the whole group is VW itself.

Do you expect more work to be outsourced?

Outsourcing is not a strategy. Outsourcing is a result of permanent benchmarking of Volkswagen's in-house abilities.

If my benchmark shows that I am not competitive in-house, I will outsource.

If, however, I prove to be competitive I will in-source. At the moment our component plants are getting more competitive and we are insourcing more on the A4 Golf than we did on the A3 Golf.

A new supplier park at Wolfsburg has just been announced. What impact will this have?

We are going to produce a large number of cars in Wolfsburg, and a large number of modules will be supplied to the plant.

So we talked to the local government at Wolfsburg and said that we needed some kind of supplier park where suppliers could, for instance, assemble in sequence, near to our plant.

It's not because we wanted to force outsourcing.

What kind of suppliers do you expect to go to the park?

It will be similar to Mosel. There will be suppliers of front ends, cables, wiring, cockpits and axles: all modules that logistically make sense to mount near the plant.

Do you specify Tier 2 suppliers for all your modules?

Yes, we do for most modules because of the platform strategy. We need to control the whole platform volume worldwide.

For instance, if the Golf cockpit is made in five different places in three different continents with maybe five different suppliers, each supplier has to buy the same switches and the same instrument clusters.

How do you ensure that the supplier delivers what you want?

We have a very tight process. After we award business to a supplier, meetings are held on a regular basis with myself and colleagues from engineering.

Every buyer and designer has to get approval for any changes. Every change causes a cost and every change has to be approved on every program and on every part.

What happens when a supplier fails to deliver a system to the target cost?

The easiest thing to do would be to kick him out, but a lot of money has been spent which cannot be recovered.

When we put a team in place, every resource that Volkswagen can offer is given to the supplier to help him achieve the target price.

I have been with VW six years and there has not been one case where the target price has not been reached at the end.

Are you selecting suppliers earlier?

Of course, because of the rapid change of products.

When I started in purchasing, it took five years for a car to be made; now it takes 36 months, and with a platform, it can be even less.

How many people work in sourcing across the Volkswagen Group?

Around 300 at Wolfsburg and globally I would guess 600 to 700. It has increased because of the different models coming out and because the buyer is also getting more active in the product development issue.

He was a paper mover 10 to 15 years ago; now he has a strategic function.

What about your purchasing relationship with Rolls-Royce/

Bentley?

The purchasing people at Rolls-Royce/Bentley and I have a lot to learn from each other. Our suppliers have to learn how to be competitive with low volumes.

We know how to manage 3,000 parts an hour, but we don't know how to manage 3,000 parts a year. This gives VW a great learning opportunity, as we are moving into niche markets.